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You pay bills on time, so why isn't your credit score higher?

ConsumersFinanceCredit and DebtMcDonald's

Marlene Partridge and her husband have a six-figure retirement income, no debt and pay off their credit cards each month.

Yet when the 62-year-old former teacher from Idaho saw her credit score a couple of years ago, she was disappointed that it wasn't near perfect.

"Are the very best credit scores reserved only for the extremely wealthy?" she asked recently in an email.

It's a question that often crosses consumers' minds, particularly the most careful users of credit. They make all the right moves, such as paying bills on time each month, yet their score is nowhere near 850, the top number in the widely used FICO score.

Many consumers are aware of the important role that credit scores now play in our financial lives. The three-digit number dictates whether we get a loan or credit card, and influences the terms. Yet there still is a lot of confusion, and some myths, about how scores are derived. And there are so many types of scores with different number ranges that consumers are only confounded further.

To find out why Partridge's score wasn't as high as she expected, I ran her case by John Ulzheimer, president of consumer education for SmartCredit.com and a former manager with FICO.

Ulzheimer says that without a credit report in hand, he couldn't say for sure what caused Partridge's score to be less than stellar.

But he dispelled one myth: Income, or the amount of assets you own, has nothing to do with credit score. Income isn't even listed on the credit reports that are used to calculate scores.

If income were a factor, Ulzheimer says, "professional athletes, doctors and lawyers would have fantastic scores and people working at McDonald's would have the lowest scores. That isn't true."

Ulzheimer, though, suspects Partridge's score might be affected by her rewards credit card. The Partridges have a Discover card that they use for as many purchases as possible to rack up rewards.

Even though the couple pays off the card each month, he says, the credit report will post the previous month's statement showing the balance due. And if they are putting a large amount of purchases on the card, the big balance can ding their score.

But it's easy to fix, he adds. The next time Partridge wants to apply for a loan or other credit, all she has to do is pay the card off in full and stop using it for a month, he says. The zero balance will be reported on her credit report, he says, "and her score should shoot through the roof."

Or, he adds, Partridge can pay off the card before the statement is issued so that her balance will be reported as zero on her credit record.

A perfect credit score is possible.

Though some consumers have achieved a top score of 850, it's not unusual for FICO to hear complaints from others who fall short of the mark, says Barry Paperno, consumer affairs manager for myFICO.

"A lot of these folks are used to being the best at what they do and getting the top scores at school," he says.

Still, you don't have to get a top score to receive the best credit terms.

"There is nothing an 850 can get you that a 780 won't get you," Paperno says.

In fact, myFico.com posts the most recent interest rates available on mortgages and auto loans based on a consumer's credit score. The rate on a 30-year mortgage for a $300,000 Maryland home as of Monday was 3.764 percent — the same for someone with a FICO score of 760 or 850.

eileen.ambrose@baltsun.com

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